Publishing giants' merger talks could could cost many Kiwi jobs

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A merger of publishing giants Random House and Penguin could lead to large-scale job losses in New Zealand and reduced competition, says a prominent figure in the local book industry.

London-based Pearson, which owns Penguin, has confirmed it is talking to Random House's owner, Germany giant Bertelsmann, about a deal that would create the world's biggest book publisher.

Commentators say combining the companies - two of the "big six" global publishing firms - would provide the scale required to combat the challenge posed by digital publishing and the growing strength of web-based book retailers.

"The two companies have not reached an agreement and there is no certainty that the discussions will lead to a transaction," Pearson, which also owns the Financial Times and has a stake in the Economist magazine, said in a post on its website.

Graham Beattie, a book blogger and former managing director of Penguin Books NZ, said Penguin distributed books in New Zealand from Australia, and Random House had a distribution facility on the North Shore.

"One would think that if the two got together then all the distribution would probably go to Australia for the combined company," Mr Beattie said.

"The book publishing industry in New Zealand is based on the North Shore of Auckland and these two are the two big players ... there's no question that if they merged the staff would be reduced - I'd say by at least a third."

He said authors and their agents would also be left with one less publisher to approach for publication and the possible merger could lessen competition.

It was unlikely to result in more expensive books for consumers, Mr Beattie said, but it could make life more difficult for writers negotiating book deals.

"It would have to reduce competition - they are two intensively competitive companies."

A Random House New Zealand spokeswoman declined to comment on the merger talks, while Penguin Books NZ provided only Pearson's statement.

Publishers Association of NZ president Kevin Chapman said it was too early to say what local effect the merger might have.

"All there is is a possible deal, and until the deal is firm and you know what the structures are you don't know what impact anything will have because there is so many ways to slice and dice these businesses," he said. "From the association's point of view we'll wait and see what happens."

Ian Whittaker, a London-based analyst at Liberum Capital, told the Bloomberg news agency a merger made strategic sense for Pearson.

The strength of a combined Random House and Penguin could give the firms more power against big buyers, such as online retail giant amazon.com, which had the ability to drive down prices, Mr Whittaker said.

"In an industry that is facing structural problems the easiest way to get profits are synergies and cost-cutting."

The big six
* Penguin Group
* Random House
* HarperCollins
* Georg von Holtzbrinck Publishing Group/Macmillan
* Hachette
* Simon & Schuster